A Bipartisan Path Forward on Prescription Drug Pricing

On Tuesday, October 22nd, the Bipartisan Policy Center (BPC) hosted an event on U.S. Drug Pricing Policy Tools to Increase Access and Affordability. Subsequently, the BPC also unveiled its new white paper report related to the topic: Examining Two Approaches to U.S. Drug Pricing: International Prices and Therapeutic Equivalency. A panel discussion followed, bringing together patient advocates, medical researchers, industry experts and public policy professionals. FREOPP’s Avik Roy served as a moderator for the panel, as well as a Senior Advisor to the BPC for the report. Additionally, Senator Rick Scott (R., Fla.) delivered a keynote address and referenced his co-sponsored legislation in the Senate, The Transparent Drug Pricing Act (S. 977), that addressed many of the issues enumerated within the report.

The use of reference pricing in other countries

Across the country, public concerns about the access and cost of necessary medications have spurred Congress to propose multiple policies addressing the high costs of prescription drugs. The BPC’s report examined the implications of utilizing both internal and external pharmaceutical reference pricing in the United States, and looked to European countries such as Germany, Denmark and Switzerland, who each utilize different forms of reference pricing to allay the high costs of medications to their citizens. However, with the United States’ role as a home for much of the world’s leading pharmaceutical research and development (followed by Germany), the U.S. faces unique challenges when considering pharmaceutical reference pricing. Nevertheless, experts from both sides of the aisle agreed on several key recommendations while examining internal and external reference pricing.

External reference pricing

A common practice across the industrialized world is for governments to benchmark what they pay for prescription drugs to prices in other similar countries. This is often called “external reference pricing.” The BPC report recommended that the U.S. Department of Health and Human Services (HHS) consider implementing a pilot program examining the drug pricing from other countries to help set Medicare Part B or D reimbursement rates for single-source brand name drugs or biologics that are expensive and face little to no competition. By applying the lessons learned from other countries, these observed best practices may potentially offer a path forward for lower drug prices.

Internal reference pricing

A less common approach, but one of interest to the BPC authors, were pricing decisions based on a group of similar drugs within a country, often called “internal reference pricing.” For example, Denmark deploys a consumer-driven system in which the insurer nearly fully covers the cost of the lowest-priced drug in a given class, but expects consumers to pay the difference if they choose a more costly alternative.

The BPC report offered several recommendations focused on building upon various federal agencies already in place that are capable of laying the groundwork for internal reference pricing, as well as ensuring that multi-sector stakeholders (e.g. patients, providers and payors) are involved within the process. One step toward achieving this goal, as noted by BPC’s Anand Parekh, “would be the reauthorization of the Patient-Centered Outcomes Research Institute (PCORI),” and the HHS continuing to support assessments of “comparability” within its regulatory purview. Additionally, HHS could consider creating an advisory group or task force to examine the added incremental benefits of any new biologic or brand-name drug. Also, the report and the panel spoke about the Centers for Medicare and Medicaid (CMS) being given the authority to implement least costly alternative policies for Medicare Part B, while consider updating the Medicare Plan Finder tool with up-to-date information on patient cost-sharing so Medicare Part D can institute internal reference pricing.

An immense opportunity to lower drug costs

In summary, the high costs of prescription drugs are bringing both sides of the ideological aisle together to find practical, bipartisan solutions moving forward. As noted by Roy, “over 90 percent of all prescriptions in the United States are for low cost, affordable, off-patent, generic drugs,” showing that the opportunity to improve the status quo remains immense. By learning from the best practice solutions found in other countries, as enumerated more in-depth with FREOPP’s What Medicare Can Learn From Other Countries on Drug Pricing, the U.S. may be able to implement tangible, bipartisan changes that could help bend the cost curve of health care spending in the future. While reference pricing alone is not a panacea, if implemented correctly, it may serve as an important next step.